- Determine gross income, adjustable gross income, taxable income and calculate federal income tax
- Apply exemptions, deductions, and credits to basic income tax calculations
- Calculate federal income tax
- Determine social security and Medicare taxes
Taxation Demystified: Navigating Personal Taxes with Stephan
Stephan, a hardworking individual, has to manage his full-time job and freelance work, while also taking care of his expenses and savings. As the tax time approaches, Stephan has decided to make an early start by estimating his taxable income, determining his federal income tax, and assessing his social security and Medicare taxes. Let’s help Stephan navigate through this complex process of tax calculations to better understand personal taxation.
Stephan has meticulously gathered all his financial documents and organized the information into a neat table (shown below). The table contains information about his earnings and expenditures throughout the year.
| Category | Dollar Amount |
|---|---|
| Full-time job | [latex]$63,782[/latex] |
| Freelance work | [latex]$12,829[/latex] |
| Interest from accounts | [latex]$189[/latex] |
| Tax-deferred retirement | [latex]$3,600[/latex] |
| Mortgage interest | [latex]$895[/latex] |
| Property taxes | [latex]$2,900[/latex] |
| Health savings account | [latex]$2,400[/latex] |
| Child tax credit | [latex]$2,000[/latex] |
| Earned income tax credit | [latex]$1,800[/latex] |
After calculating his taxable income, Stephan, filing as a single person, then proceeds to calculate his federal income tax. He needs to use the tax table given below to calculate the amount of federal income tax he owes based on his estimated taxable income.
| Tax Rate | For Single Filers |
|---|---|
| [latex]10\%[/latex] | [latex]$0[/latex] to [latex]$11,000[/latex] |
| [latex]12\%[/latex] | [latex]$11,000[/latex] to [latex]$44,725[/latex] |
| [latex]22\%[/latex] | [latex]$44,725[/latex] to [latex]$95,375[/latex] |
| [latex]24\%[/latex] | [latex]$95,375[/latex] to [latex]$182,100[/latex] |
| [latex]32\%[/latex] | [latex]$182,100[/latex] to [latex]$231,250[/latex] |
| [latex]35\%[/latex] | [latex]$231,250[/latex] to [latex]$578,125[/latex] |
| [latex]37\%[/latex] | [latex]$578,125[/latex] or more |